Good Bad Cheap Property – Leave Bad Out
Jack Butala: Good Bad Cheap Property – Leave Bad Out. Every Single month we give away a property for free. It’s super simple to qualify. Two simple steps. Leave us your feedback for this podcast on iTunes and number two, get the free ebook at landacademy.com, you don’t even have to read it. Thanks for listening.
Jack Butala: Jack Butala and Jill DeWitt.
Jill DeWit: Hello.
Jack Butala: Welcome to our show. In this episode Jill and I talk about the good, the bad, and the cheap property. We’re going to leave the bad out. Sounds like a Western.
Jill DeWit: It does.
Jack Butala: Great show today Jill. Let’s take a question before we get all into it posted by one of our members on successplan.com, our free online community.
Jill DeWit: Okay. Matt asks, “I have a free property that I’m flipping for cash, and the buyer wants to put $1,500 down now and pay the remaining $3,000 in 2 months. His down payment would cover my costs of the acquisition. However, I don’t like the risk of waiting on it if he makes the rest of the payments. Has anyone had any experience with this? Is it wrong to make that down payment non-refundable to reduce my risk and wasting time? He has agreed that he can’t take position until paid in full. Thanks.” Jack?
Jack Butala: Yeah. I mean, this taps into a larger concept that took me a while to get over when I started, but now I love it and live by it everyday. Have an acquisition criteria. Have a sales criteria and don’t veer from it too far because it starts causing a lot of work and time for everybody in your organization, you included. It sounds to me like this is out of this person, Matt’s, comfort zone here or he’s got a lot of questions about it. If this happened to us I would just say no. I wouldn’t even talk about it and that would be the end of it. I would say, “Here’s the terms of the property and if you can’t afford it or don’t want to do it, then that’s just the way it is.”
Traditionally, all the stuff that we’ve learned about real estate all throughout our lives, a lot of it I think is antiquated based on the Internet. What you want to do is just put a machine in place and just let the machine do the work for you. When you have to start reviewing every deal, and talking to every seller, and really doing it the old school way where you’re making a deal, then the magic of the Internet and how fast you can get these deals done and processed and the whole thing, it loses its value. I don’t know what Matt asked for the property, but if he wants $1,500 down and $500 a month, and this guy only wants to do it at the end of 2 months, I wouldn’t even take the call personally. I think, Jill, you probably have a different answer.
Jill DeWit: Well, you know, I was actually doing the math while you were talking. I see the cash part, and the $1,500 is just going to cover it. Here’s a couple things I picked up on. Matt’s more than doubling his money on this by the way. He paid $1,500 or less and he’s selling it for 4,500.
Jack Butala: Yeah. He’s tripling his money.
Jill DeWit: I know. Exactly. I thought was really kind of cool. You know what? Jack, I love it and agree with you. Here’s my thoughts. You have a criteria. It’s cash. It’s like, “I won’t have it in 2 months.” Okay, but what I would do then Matt, if you’re not comfortable with this, and I get it, I would say, “Call me in 2 months. If it’s still available you’ve got your 4,500. It’s a deal. It’s still here.” But then you know what Matt? It’s still on the market and you might have a guy come along in 1 week with the full $4,500 and all you can say to the other guy is, “Sorry. That’s just how it goes.”
Jack Butala: Yeah. We’re at a point now. I mean Land Academy and Land Stay, Land Stay is our real land company, where if they don’t click on it on the Internet, or if we don’t see it wholesale bulk, which is what we usually do, or if there’s any kind of talking like this, I just don’t do it because that’s not what we do here. If I want to do talking, and go back and forth, and talk to people for a couple weeks on a deal, I’ll buy an apartment building and make a ton of money. Or flip some kind of something. I just don’t think, and I think that if you reasonably explain that to a seller in a very nice way and then follow it up with, “And that’s why it’s so inexpensive, because we keep our costs down like this.” They get it.
Jill DeWit: You know what? Here’s my thing too because I’ve had this Matt. If this guy really is that excited and fired up about it and you tell him, “Look, I’m sorry. I can’t do that. It’s $4,500.” You might even say, “I’ll take 4.” Whatever you want to do, say, but that’s it.
Jack Butala: Yeah, but now you’re negotiating the deal Jill.
Jill DeWit: Okay, well, “It’s $4,500. It’s cash. That’s the way it is. Period. That’s all I’m doing. I won’t waver.” They guy has 1 choice, has 2. He’s either going to pay it now or cross his fingers. You know what? He might come up with the money.
Jack Butala: Yeah.
Jill DeWit: If he’s really that fired up about it Matt, he might find a way. I’ve seen people do things, come up with stuff, and find a way if they’re that excited about it. You know? That’s it.
Jack Butala: Think about this for a second. I’m really glad that this guy asked this question. I’m not so much answering this question anymore, but let’s say that you have an 8 hour day. You have a ton of property to sell. You have 100 properties in inventory and they’re all posted on the Internet. If they want, if buyers wanted to, they’d just click on it, and just buy it, and it’s over. They’d get processed by the back end function that you set up. It takes an average of a half hour a day in an 8 hour day to sell some property. You could only sell 16 properties in a day. That’s without even taking a bathroom break or a lunch. Right?
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: This is the very definition of non-scalability by the way. this is what I always say, like in our live talks and what we do at colleges, you want to always make sure you’re in a scalable business. A coffee shop’s not scalable. You sell a cup of coffee and then you make some profit margin. You sell another cup of coffee. The best thing that can happen is they’re lined up out the door, and it’s still not scalable. It’s repeatable. You can open another location. Matt’s not running into this problem if he’s talking to people and negotiating deals. You only can do so much in a day, but if he does nothing, does not answer the phone, after this is all posted and spends only time on acquisitions, which is worth it because that’s what we teach, but no time on sales. Just let the people click through, and buy it, and get the deeds in the mail, that’s scalable. He could sell 5,000 properties in a day if it’s all posted.
Jill DeWit: Mm-hmm (affirmative), and priced right.
Jack Butala: This whole notion of negotiating deals, and spending time with buyers, I’m not saying, with acquisitions you have to do it and should do it because they’re so important. They’re your lifeline. But with sales, I don’t think so. We set up Land Academy that way Jill.
Jill DeWit: Yep.
Jack Butala: We could get 1,000, 2,000 members additionally tomorrow.
Jill DeWit: Yep.
Jack Butala: It would not …
Jill DeWit: Change a thing.
Jack Butala: There’s no extra work.
Jill DeWit: Exactly.
Jack Butala: In fact it would make us better, but you don’t want to get into something that’s not scalable. It’s so hard, especially for new young people, it’s so hard to walk away from a sale like this because it’s $4,500.
Jill DeWit: I know.
Jack Butala: $3,000 profit. If you’re brand new it’s different and you’re learning.
Jill DeWit: Yeah.
Jack Butala: It sounds like Matt is, and that’s great, but keep it in the back of your mind. That’s all. Hey, if you have a question you want to be on the show call 800-725-8816. Today’s topic: the good, the bad, the cheap property. Leave the bad out. Jill and I deal with this all the time. We have acquisition meetings, not meetings but review meetings, inside the database. It’s so tempting. Sometimes it’s free. Sometimes people say, “Here’s a bunch of free property. It’s going to be done.” It’s awful property. You want to leave the bad property out, and only buy the good stuff. Some weeks you’re going to say, “It’s over. My acquisition pipeline’s gone.” Then the next week it just rains properties.
Jill DeWit: Exactly.
Jack Butala: Just because it’s super cheap, in this poorly titled episode by me, don’t buy bad property. What’s bad property Jill? What’s bad property in our world? Have you been accused of anything lately?
Jill DeWit: No, because we don’t buy bad property.
Jack Butala: Not by buyers. Just people, like podcast people and stuff.
Jill DeWit: Have I been accused of anything?
Jack Butala: Have you been accused of only buying property with no access?
Jill DeWit: No. Oh my gosh. Oh, don’t even go there. I know where you’re going. Like that one show that we did that time that I went off.
Jack Butala: Exactly.
Jill DeWit: I went off on what’s his face who’s really a big deal. He just tripped my radar. He was almost like, “I don’t care who you are Mr. Clinton,” but you know.
Jack Butala: Jill gave him the what for.
Jill DeWit: I did. It was like, “You may be big in your world, but you don’t. This is not cool.” Yeah, we don’t do that. That’s so funny. No, but yeah.
Jack Butala: There’s no tricks here.
Jill DeWit: No, none.
Jack Butala: We just buy property, houses too, from people who just don’t want it anymore. They don’t want to list it. They don’t want to go through all that stuff. They just want a check. Want to be done.
Jill DeWit: If it’s bad we don’t buy it. There might be some stuff, yeah. I don’t want it. There’s plenty of things that we pass on. I guess that’s the thing that people don’t understand too for a couple of reasons. 1, it’s stuff we don’t want, or 2, it doesn’t meet our criteria at that time. That ties into what you just said.
Jack Butala: Here’s a good story, a real acquisition story that happened about 4, 5 years ago. Maybe more than that. A guy called me and he said, off of a letter, his mother died recently. She had a ton of property in Imperial County and it was all cut up perfectly already. There were 80 acre properties, and 5 acre properties. He said, “It’s got some back taxes on it. I just want to get rid of it. I just want to be done with this.” Seriously. He called me a lot and I kept telling him no. Here’s why. There is absolutely no access. I’m in the business of finding access when there might not be some access, and I could not get anywhere near that property. No access. We have a clientele, a separate section of our database, where people are requesting no access property. They want to be not found ever. I still couldn’t. This property was not. It just tripped my thing. I don’t care how cheap it was. He was negotiating with himself. He would say, “All right. I’ll take 20,000 for all of it.” I would say, “No.” Click.
Jill DeWit: That’s so funny.
Jack Butala: He would call back and say, “All right. How about 15?” I call that negotiating with myself. By the way you never want to buy anything this way. I don’t care if it’s a car or what. The way to properly negotiate is, “I’ll give you 20,000.” Then the other guy says, “Make it 22.” Then you meet in the middle at 21. What you never want to do is say, “I’ll give you 20,000.” The seller says, “No.” Then you say, “All right. I’ll give you 22.” “No.” “24.” “No.” You just never know where it’s going to end. I always have to meet in the middle. I see some new people do. I do that once in a while. When I want something really bad I’ll start negotiating with myself. It’s awful.
Jill DeWit: You know, that’s good. That’s really good advice because I have some times that people will say, “Oh, just make me an offer.” Uh-uh. I’m not going to go there.
Jack Butala: I already did. It’s in the letter.
Jill DeWit: No, no, no. Well, maybe it’s a 5 year old letter or something. Or it’s an additional property. Or something else.
Jack Butala: Oh, right, right, right. I see.
Jill DeWit: There’s times where there’s surprise properties that we don’t have an offer on the table. Sometimes they just find our website, because there’s a place on our buying website, and they’ll put stuff in there. They just want you to come up with a number when they darn well know there’s a number in their head that they would settle for. You can’t win with that one either.
Jack Butala: Right.
Jill DeWit: Yeah, I don’t play that game. You figure out a number. You let me know.
Jack Butala: Sometimes they don’t even know.
Jill DeWit: True.
Jack Butala: They’re just trying to see what … they want an appraisal.
Jill DeWit: Oh, yeah. That drives me crazy too. That gets all the time. That’s so funny. It’s funny when that happens.
Jack Butala: We have a friend. I’m going to tell this story. I’ve known her. Our kids are the same age. I’ve known her for years, and years, and years. This is what they do. They buy a house that needs to be renovated, and they very slowly renovate it while they’re living there. Then, when it’s just about done, or done, they put it up for sale. They put the house up for sale for, I don’t know, 2, 3, $400,000 more than it could ever get appraised for at the time. It’s for sale for 2, 3, and 4 years. They eventually get their price, and that just strikes me as silly. I get a cash buyer who just comes in eventually and buys it, and there’s no appraisal on any of that. That’s the only way they can get away with that. That’s not a deal maker. That’s just, I guess, I don’t know.
Jill DeWit: It’s a weird model.
Jack Butala: Yeah. Some people think we’re crazy by offering these below value offers on the front end. I don’t know.
Jill DeWit: I was explaining that to somebody just recently too. They were asking me some questions. They’re like, “Wait a minute. Why don’t you do that?” I’m like, “Well, that’s not my thing. I’m happy to double my money and get out, and I really really hope that the person that buys it from me really makes a lot of money because then they love me. They keep coming back. Everybody wins. That’s it.” That’s why I’m doing what I’m doing. I know how to buy it right. That’s not their thing. They still got it at a good price and they’re going to make more money.
Jack Butala: I’ve trained our tens of thousands, if not hundreds of thousands, of our database of buyers over the 15 years. I’ve trained them to look forward to getting our email because they get sticker shock, the really good kind, when they open it. Like, “Wow. What’s this guy going to price this? Where’s he going to price this 40 at today? Last time it was $8,000 for probably a $25,000 property.” That’s why we have such a huge buyer base, and we don’t work on it that hard just because that’s our model.
Jill DeWit: Exactly.
Jack Butala: Overpriced property on the sell side, I mean, the world’s full of that. There’s hundreds and hundreds of thousands of properties in MLS’s all over the country just sitting there for years. Like our friend that we just talked about. I’d rather just move it and get on to the next deal.
Jill DeWit: The good, the bad, and the cheap.
Jack Butala: It’s the technical too. 2 minutes of property advice from our 15 year, 15,000 transaction experience. Don’t buy property that has absolutely no access. I mean, there’s not a road in sight for miles, and miles, and miles. Not a 2 track, not a little path. There’s just, nothing’s been there for 25 years except possibly vermin. Trust me. Not even if they give it away. It’s just going to cause you a lot of customer service problems and things like that. If you do end up with some property like that, and invariably you will end up with property like that if you buy portfolios, give it away yourself or fully disclose that you just don’t think there’s any access to this property at all based on what you’ve seen because you don’t want to get in trouble. There’s probably 99 bajillion positive things about this business, but you don’t want to get in the business and be known for selling property without access. Again, speaking from experience. I’ll skip that anecdote. You have a question, or you want to be on the show, 800-725-8816. Jill, do you have some inspiration for us?
Jill DeWit: Trust your gut. If it doesn’t feel right, check their track record. You’re probably right. I see this often in all kinds of environments. You know, there’s something. Here’s why. I’m watching Facebook and I’m seeing all this stuff. There’s so many people that are promising all kinds of things, like, “You can be a millionaire tomorrow.” And, “You can be this. You could have that.” They show big boats, and fancy cars, and all this stuff. I’m like, “What credibility do they have?” I don’t know if everybody goes there, but that’s where I immediately go.
Jack Butala: Right.
Jill DeWit: I’m like, “Okay, what are you promoting? What is this?” I still can’t figure it out. Sometimes when I start digging, too, and I’m like, “I still don’t know what it is,” then I’m like, “All right.” I’m doing my research. I’m trying to check for a track record, and then what I find out is I’m often, this isn’t for me. I don’t know what this is. I guess it’s just I’m going to remind everybody that, do your homework on people, and situations, and investments, and all those things before you get into them, and trust your gut.
Jack Butala: Good advice as always.
Jill DeWit: Thank you Jack.
Jack Butala: Women have a, women intuition. It’s awesome.
Jill DeWit: We were talking about that the other day. We were out to dinner with some friends.
Jack Butala: Join us in another episode where Jack and Jill discuss how to use information. That’s me.
Jill DeWit: And inspiration, that’s me.
Jack Butala: To get just about anything you want.
Jill DeWit: We use it everyday to buy property for half of what it’s worth and sell it immediately.
Jack Butala: You are not alone in your real estate ambition. Good show Jill.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: Never buy property that’s just got no access.
Jill DeWit: Right.
Jack Butala: It sucks. It’s such a hard thing, especially when you’re new. Even now I look at it like, “Man we could get all this property for next to nothing.” Then it just causes problems down the road.
Jill DeWit: Mm-hmm (affirmative). You know, it kind of reminds me of our Too Good To Be True show that we did the show before this one where people think, “Oh, well if you bought it that cheap there must be something wrong with it.” Again, you think it’s too good to be true, but it is true. There’s some great property out there that people don’t want, and you can get it for a good price. Like you said Jack, there’s the good, and there’s the bad. Sometimes the good and the cheap still go together.
Jack Butala: Good and cheap’s awesome.
Jill DeWit: Mm-hmm (affirmative). There is good and cheap, and there’s bad and cheap.
Jack Butala: Yeah.
Jill DeWit: Make sure you’re doing both.
Jack Butala: Bad and free.
Jill DeWit: Yes. Bad and free. Oh, isn’t that interesting. Shoot. There’s a few that, I have a list for our people that when people call in, you know we have some old stuff out there that people call in. They want to still offer us from 6 years ago, whatever it is. I feel bad that there’s property that we won’t take no matter what.
Jack Butala: Right.
Jill DeWit: Even though you want to give it to me it’s not even worth my time to pay the recording fees, and take my staff off what they’re doing.
Jack Butala: You don’t want to buy a piece of property that when you sell it they go out there and they’re just real disappointed.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: You don’t want to be in that business.
Jill DeWit: That’s true.
Jack Butala: That’s what you don’t want.
Jill DeWit: that’s a good way to look at it. I love it. Yeah. That’s a great thing Jack. As long as you have that in your head. You want people to drive out there, when they finally get to go see it, and go, “Wow.” They stand on it and they say, “I own this.” That’s what you want.
Jack Butala: Exactly.
Jill DeWit: Not like, “What did they sell me? What the heck?” No, you don’t want that. Good tip. Thanks Jack.
Jack Butala: Information and inspiration to buy undervalued property.
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